FOOD SECURITY BILL ILL TIMED

 Former RBI Governor Bimal Jalan today said the Food Security Bill is ill-timed and will further aggravate the economic situation by increasing fiscal stress. "Given the macroeconomic situation just now, whether we can afford it (food security plan) right now ? Timing is not right, timing is an issue," Jalan told PTI while replying to a query whether the food security plan will increase government's fiscal stress."We should not do this because of electoral considerations. We should do it because it can be done, it needs to be done. And this is a desirable thing to happen. We should not do this because of electoral considerations. We should do it because it can be done, it needs to be done. And this is a desirable thing to happen," he added. 

Jalan further said: "The current macroeconomic situation is very distressing as of now. India's GDP growth is low, CPI s high, current account deficit (CAD) is high, fiscal deficit is high, and you are seeing there is no confidence in the market." His comments come within days of the RBI in its annual report raising concerns about the viability of the Food Security law.

The Lok Sabha on Monday passed the Food Security Bill, barely eight months ahead of the 2014 general elections. It will have to approved by the Rajya Sabha. The BJP had dubbed food security bill as "vote security bill". The passage of the Food Security Bill in Parliament will pave the way to give nation's two-third population the right to 5 kg of foodgrain every month at highly subsidized rates of Rs 1-3 a kg. At Rs 1,30,000 crore government support, the food security programme will be the largest in the world. It would require 62 million tonnes of foodgrains.

As the Bill is likely to be implemented in the remaining months of the current fiscal, its impact on government finances will be less in 2013-14, but much more in the years to come, rating agency Moody's said. The total food subsidy budgeted in the current fiscal is Rs 90,000 crore, of which Rs 10,000 crore is towards the implementation of the programme.
The former RBI governor, who held office during the time of the Asian crisis of 1997-98, said that RBI will have to take measures which are supportive of investment and confidence boosting. 

ACTUAL IMPACT IN COMING FISCAL 

The proposed food security law will increase the government's subsidy bill but its impact is expected to be felt only in the upcoming fiscal years, says an HSBC report.
"The Food Security bill which has been recently approved in Parliament will also increase the subsidy burden. However, its impact may be felt only in upcoming fiscal years," HSBC said in a research note today.

The annual financial burden after its implementation is estimated to be about Rs 1.30 lakh crore at current cost.